From Bihar, the good news on banking: How Jan Dhan has deepened financial literacy among poor women, and in rural areas

Context: In Bihar, PMJDY has covered more than 5 crore beneficiaries, of whom more than 3. 67 crore are in rural areas. Since 2015, more than 3. 8 crore RuPay debit cards have been issued in the state. The reach of this scheme is indeed impressive.

The authors of this article examined the account level data provided by 12 public sector banks for over 73 lakh out of 82 lakh beneficiaries, whose accounts were opened in 2015. Financial behaviour of these account holders was analysed.

Findings are listed.

What is PMJDY?

The Pradhan Mantri Jan Dhan Yojana, launched in 2014, is a national mission on financial inclusion.

It aims to ensure that all Indians, particularly low-income groups and weaker sections, have access to financial services, including a basic savings bank account, need-based credit, remittances, low-cost life and general insurance and pension.

The scheme also envisages a robust financial literacy programme, with a key objective being to enable the beneficiaries to leverage digital technology and internet-based banking.

Has access to banking channels resulted in a corresponding inc in the utilisation of banking services?

The basic banking services – deposits and withdrawals – have witnessed a significant increase among women.

– The number of deposits per account per year among women was less than two in 2015 across all 38 districts of Bihar. By 2020, it increased to more than eight deposits per account per year in 26 districts. From 2017 through 2020, women have outnumbered men in the average number of deposits per year.

– These trends are across both rural and urban areas, and could be partly attributed to central and state government initiatives to make women the primary recipients of various development schemes.

There has also been an increase in the per capita number of withdrawals by women beneficiaries of PMJDY.

– There has been an average annual increase of approximately 59% over the preceding year in the average number of withdrawals among women in rural areas.

Significance: The increase in withdrawals is particularly significant as it indicates a deeper engagement with banking services. Women are not just passive recipients of benefits from the government but are actively utilising their bank accounts in their day-to-day lives.

Has financial literacy under PMJDY contributed to increased utilisation of digital banking?

As per the study, the uptake of digital banking services by all genders has increased. This outcome points to the efficacy of the financial literacy efforts as part of the PMJDY.

– In 29 out of 38 districts, digital transactions represented only 10% of all transactions in 2015. By 2020, 40% of the transactions undertaken by women across all districts in Bihar were digital.

– Moreover, instead of urbanised districts, it is predominantly the rural districts that have witnessed this increase.

The proportion of accounts undertaking one or more digital transactions has also shown an upward trend.

– There is a strong likelihood that the systematic mapping of each district into sub-service areas and the large-scale deployment of bank mitras have contributed to this increase.

These combined strategies ensured that households could find banking services within a short distance or even at their doorsteps, even as financial literacy was enhanced among previously unbanked or under-banked communities.

Source: This post is based on the article “From Bihar, the good news on banking: How Jan Dhan has deepened financial literacy among poor women, and in rural areas” published in The Times of India on 28th Apr 22.